Inefficiencies too extensive for U.S. Postal Service operations

On Friday, Feb. 8, the U.S. Postal Service released the financial report for its first fiscal quarter and announced a $1.3 billion loss. This loss was actually mild for the agency, as the presidential election and holiday season boosted revenue. The Postal Service suffered a $3.3 billion loss during the same quarter the year before. In the 2012 fiscal year, the Postal Service’s total loss was $15.9 billion.

On Feb. 6 — two days before the financial report was released — the Postal Service announced it would not continue to deliver mail, only packages, on Saturdays beginning in August. The change is slated to save the Postal Service $2 billion per fiscal year.

According to Bloomberg, Postmaster General Patrick Donahoe said the Postal Service has called on Congress for help. “The scale of our challenge requires major legislative reform to our business model,” Donahoe said. “We do not want to be a burden on the American taxpayers.”

But a $15.9 billion loss seems to be quite a substantial burden.

Another attempt to cut costs is to remove more than 500 thousand Postal Service employees from the government employees health-benefits system.

But these changes can only help so much to get the Postal Service out of the red.

Richard Geddes, a Cornell University associate professor, said these changes won’t save the Postal Service. He believes that altering its business model is the answer. “It’s like if you reduce the costs of horses and buggies in the automobile era,” he said.

So not only will mail take one day longer to be delivered in mailboxes, Congress will most likely be forced to help bail out another inefficient government agency.

The Postal Service is one of the only government agencies that regularly advertises. Why? It desperately needs to generate revenue, and it has serious competitors that are exposing its inefficiencies.

Compare the Postal Service to UPS or FedEx. These private companies have adjusted to the issue of increasingly obsolete snail mail by shifting focus to speed and logistics. Even UPS’s slogan boasts, “We love logistics.”

Both UPS and FedEx offer extensive solutions for businesses and time-saving options for all customers, while the Postal Service is forced to decrease services for customers in order to cut costs.

And while UPS and FedEx have the resources that lend to financial flexibility (they have access to $10 billion in capital at any time, according to Bloomberg), the Postal Service could only operate for 10 days with cash on hand.

Ultimately, UPS and FedEx have an incentive for efficient performance: profit. What does the Postal Service have besides a government to keep them afloat? It continues to exist only because it is a government agency, not because it operates under efficient and innovative business strategies.

If the Postal Service is to continue to deliver mail, its business model must change. Otherwise, it will continue to operate as an agency that siphons U.S. citizens’ tax money and makes snail mail live up to its name.

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